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Candy Apple began a trading business on 1 April 2019. Her sales since the commencement
of trading have been as follows:
April to July 2019……………..£10,500 per month
August to Nov 2019 …………..£14,400 per month
Dec 2019 to March 2020…….. £21,500 per month
These figures are stated exclusive of value added tax (VAT). Candy’s sales are all standard?
rated and arise evenly over the month.
As her accountant you have advised Candy in writing that she should be registered for VAT,
but she has refused to register because she thinks her net profit is insufficient to cover the
additional cost which would be incurred.ANSWER: ‘Candy must account to HM Revenue and Customs for
output tax at 20/120 of the value of sales from the date
that she should have been registered from’Hello Sir, I hope you’re doing good, please help me clear my doubt…
In the answer we’ve taken 20/120 as in the question there’s an indication that Candy won’t increase sales prices? so we consider them to be VAT inclusive? Or there’s some other detail that I’m missing about whether Sales are inclusive or exclusive of VAT.
Thanks a ton in advance!!
When a person is liable to register for a past period then they become responsible for the payment of VAT on any sales made, but if they are unable to collect the VAT that should have been charged, from their customers on the sales made, then the sale will be deemed to be inclusive of VAT and therefore 20/120 will be the amount of VAT
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